The Zurich authorities have launched a criminal investigation into a mysterious investment fund operating within insurer Swiss Life.

The decision follows a move by the Swiss insurance regulator to widen its inquiry into the fund, which allowed selected managers to profit hugely from Swiss Life deals.

According to the Zurich prosecutor, the probe could take up to three years, since the web of relationships between the fund and the insurer were so complex.

The news is the latest in a series of blows for Swiss Life, which recently admitted two embarrassing accounting blunders, and announced the hasty departure of Roland Chlapowski, its chief executive.

The timing is unfortunate, since Swiss Life is preparing a 1.2bn-Swiss-franc (�522m; $831m) fundraising round, due to launch on Wednesday.

Cash call

Swiss Life has also had to backpedal on an aggressive international expansion programme, after slumping stock markets dragged it to a loss last year.

The firm's shares have fallen by 80% this year, only supported in recent weeks by the firm's new-found determination to concentrate on its solid home market.

The stakes are high ahead of Swiss Life's attempt to raise more money.

If it fails, it could collapse, sending shockwaves through the Swiss financial sector and undermining the country's pension system, in which it is the biggest corporate player.

The first results of the probe by the insurance regulator are due out in about two weeks, only after investors have decided whether to give the firm more money.